Thanks for bringing this up - I deposited the check yesterday and made sure to keep the deposit receipt. Unfortunately I already tossed the envelope, but I do have email correspondence from early January where the client confirmed they had just mailed the check at the end of December. Would that help as documentation?

The email correspondence would definitely help! That's actually good supporting evidence since it confirms the timeline from the client's side. The deposit receipt is the most important piece since it clearly shows when you received the funds. If you're using accounting software, make sure you enter the income with the January date as well. Consistent documentation across all your records will make your case stronger if there's ever a question. The bank statement showing the January deposit will also be another piece of supporting evidence in your favor.

This happens ALL THE TIME with small business clients who don't understand accounting methods. I'm an accountant and have to explain this concept repeatedly every January. One trick I've started using is to always include a note on December invoices that says "Payments received after December 31 will be reported as income in the following tax year per IRS cash accounting rules.

I had no idea about university tax assistance programs. I'll definitely look into that! One question though - can I still claim education tax credits if I'm being claimed as a dependent on my dad's taxes? And would those credits go on my return or his?

If you're claimed as a dependent on your dad's tax return, then HE would claim any education tax credits based on your expenses, not you. The American Opportunity Credit and Lifetime Learning Credit would go on his return, which could help offset some of the family's overall tax burden. Your father should definitely look into claiming these credits since they can be substantial. The American Opportunity Credit can be up to $2,500 per eligible student, with 40% of it potentially refundable. Just make sure he has documentation of your qualified education expenses.

I work in a university financial aid office, and this is definitely worth trying. Many students don't realize we often have flexibility in how we structure aid packages. We can sometimes designate more of your aid specifically for qualified educational expenses rather than living expenses, which can help with the tax implications.

Thanks for this - I didn't even consider the disability angle beyond just the regular dependent rules. Do you know what documentation I need to prove their disability status for tax purposes? They both have official diagnoses but I'm not sure what the IRS requires.

You'll want to get a letter or statement from their doctor confirming their condition meets the IRS definition of "permanently and totally disabled" - which means they can't engage in substantial gainful activity because of their physical or mental condition, and the condition has lasted or is expected to last continuously for at least a year or result in death. Form 2441 (Child and Dependent Care Credit) has some guidelines about this documentation, even though you might not be claiming that specific credit. Keep the doctor's statement with your tax records - you don't submit it with your return but need it if you're ever audited.

Yes! Our family does this with my uncle. The key is EVERYONE who provides more than 10% of support has to sign the Form 2120. Then only one person can claim the dependent. The form doesn't get filed with your taxes but you keep it for your records. We had an issue where my cousin provided like 12% but didn't sign, and it caused problems during a review.

How long should I keep these receipts? And should I also keep some kind of proof that I was reimbursed like a bank statement showing the deposit?

You should keep receipts and documentation for at least 3 years from the date you filed the return. That's the standard statute of limitations for IRS audits. However, if they suspect significant underreporting of income, they can go back 6 years, so many tax professionals recommend keeping records for 7 years to be safe. Yes, absolutely keep proof of the reimbursement! This is crucial. Keep copies of any reimbursement checks, bank deposits, expense reports you submitted, and emails confirming approval of your expenses. The IRS wants to see the complete paper trail from initial expense to final reimbursement. During my audit, they specifically wanted to see both the original receipts AND the corresponding reimbursement proof.

Unfortunately, probably not. Since the Tax Cuts and Jobs Act went into effect (2018-2025), unreimbursed employee business expenses are no longer deductible for most employees on federal taxes. This includes that 20% of meal costs your company doesn't cover.

But what about expenses that only benefit the rented bedroom during the first half of the year? Would those be 100% deductible or still just 1/3?

If the expense only benefited the rented bedroom and had no benefit to your personal use areas, then you could deduct 100% of that specific expense. For example, if you painted only the rented bedroom or replaced a window in only that room, those would be fully deductible. However, most home expenses (like roof repairs, HVAC, plumbing, exterior painting, etc.) benefit the entire property and would need to be allocated based on the portion used for rental (1/3 in your case for the first period).

So would the first half of the year be considered a "rental of a portion of unit" and the second half be a separate "entire dwelling unit" rental on Schedule E? Or do you combine them somehow?